Civil Services Prep

Prelims 2015 · Economy · Question 87

With reference to inflation in India, which of the following statements is correct?

  1. Controlling the inflation in India is the responsibility of the Government of India only
  2. The Reserve Bank of India has no role in controlling the inflation
  3. Decreased money circulation helps in controlling the inflation
  4. Increased money circulation helps in controlling the inflation

Answer

Decreased money circulation helps in controlling the inflation

  • (a) Incorrect. Inflation control in India is not the responsibility of the Government alone; the RBI also plays a central role through monetary policy.
  • (b) Incorrect. The RBI directly helps control inflation by using tools like repo rate, CRR, SLR, and open market operations.
  • (c) Correct. Decreased money circulation reduces excess demand in the economy, which helps in controlling inflation.
  • (d) Incorrect. Increased money circulation generally raises demand and can worsen inflation, not control it.
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